Cost Reduction: With or Without Headcount Reduction - PowerPoint Presentation

Slide1

Cost Reduction: With or Without Headcount Reduction

Roselyn SandsThomas McCabeSlide2

1. Context van de opdracht

2

(

Remember

Darwin?)

Survival

of the

Fittest

:

How « fit » are

you

?

Do

you

« 

work

smart »:

Right

person

/Right

Skills

/Right Place/Right Time?Slide3

68%

of

organizations

are under severe pressure

to reduce

HR costs

*

1 in

4Organizations truly understand the full HR cost baseline*

25% reduction of operating costs are typically achievable on large scale HR transformations*

“Fitness” Requires Cost Competitiveness

* Source: Corporate Leadership Council 2011Slide4

‘Visible’

Human

Resources

Costs

‘Invisible’

Human

Resources

Costs

Added Costs

Lost ProductivityLost RevenueCapital UtilizationStaff Time

Spent

on

Human

Resources

Administration

Benefit

Coverage for

Ineligibles

Lost

ProductivityDue toAbsenteeism

ExcessiveVendor Fees

LostRevenueDue to LackOf Training

MisalignedCompensationPrograms

PayrollErrors

Human Resources / Payroll CostsProcesses, Policies, Program & Service DeliveryBudget

IneffectiveHuman ResourcesService Delivery Model

Examples of

Human Resource CostsSlide5

HR Cost Reduction with or without headcount reduction – That is the question!

HR cost

reduction

Cost of employment

Resources

Salary costs

Tax efficient compensation

Change pay mix

Cost effective HR policies

RedundanciesReview working practices

Refocus employees

Address

absenteeism and turnover

Employment costs

HR functional costs

HR service delivery

Vendor management

Policy and process efficiency

HR structures

Roles and responsibilities

Compliance versus discretionary activityValue of services deliveredConsolidation of multiple vendorsSlide6

HR Costs

Ideas

Opportunities

Reduce overtime cost

Address working patterns and organization to reduce overtime use

Reduce social security taxes through / of tax effective compensation

Cost effective compensation design:

Benefits in final (car)

Profit sharing agreements

Savings plan

Think benefits too (not only compensation)

Evaluation of current benefits leading to social security savings:

Lunch vouchers

Supplementary pensions

Laptop/Mobile phone/Internet

Cost efficient HR policies

Evaluation of current HR policies to ensure they take advantage of tax effective planning opportunities:

Hiring policy

Termination policy

Global mobility policySlide7

Human Resources

Ideas

Opportunities

Reduce contractors and temporary headcount

Undertake analysis of non-permanent headcount

Review cost saving opportunities and understand any resourcing issues that might arise

Introduction of innovative working practices

Review of working time arrangements to assess opportunities to implement flexible or reduced work hours or career break

Refocus employees

Redeploy employees in areas where shortage of resource needs.

Review resourcing needs and roles and responsibilities to understand where there may be redeployment opportunities

Assess where activities and training may be required to prepare for redeployment

Address turnover and absenteeism issues

Understand reasons for absenteeism and employee attrition (

eg

, leavers interview)

Develop mitigation activities to address these issues

Redundancies Headcount reduction

Careful planning and preparation is essential

Information and consultation requirements

Calculation of budget for redundancies costs

Readiness of the business to deal with an up turn in the marketSlide8

HR service delivery

Levers

Hypotheses

Opportunities

Introduction of efficient and effective HR processes reflecting best practice

Back-office efficiencies and savings could be achieved in the HR function through:

Policies and process: efficiencies and effectiveness in the delivery of HR processes with increased automation and consistency where appropriate

Structure

:

Changes to the way the HR function is structured and located including shared services and outsourcing options leading to cost savings through wage arbitrage

Roles: Moving to best in class HR to FTE ratio and increasing line management responsibility leading to headcount reduction

Review of HR function including:

Feasibility study for introduction of HR shared services, outsourcing and relocation of processes to low cost locations

HR process assessment to review effectiveness and efficiency against best practice

Assess HR non-headcount spend to review value for money and ensure the HR function is optimizing return on investment

Review of current HR structure and roles and responsibilities. Comparison against internal and external benchmarks and ensure work is being undertaken at the appropriate level

Alternative HR deliver models including SSC, outsourcing and low cost locations

Implementation of an appropriately structured HR function

Compliance versus discretionary activity

Quick win cost reduction opportunities through ceasing all non business critical activity

Review non headcount costs and assess where non business critical activities are occurring

Undertake ROI assessment to ensure it is delivering against objectivesSlide9

Manage HR vendors effectively

Levers

Hypotheses

Opportunities

Evaluation of HR vendors

Evaluation and proactive management of HR vendors may lead to a reduction in costs through:

Consolidation of multiple vendors

Lower cost providers

More effective / efficient service

HR vendor review (including expatriate relocation) – efficiency and effectiveness

Consolidation of multiple vendors

Organisations commonly use multiple HR vendors across function and operating companies. Making the most of potential economies of scale to consolidate providers can provide some substantial cost saving opportunities.

Review HR vendors in place across different groups

Consider length of contracts in place including break clauses and potential penalties

Understand interest in consolidating providers